Markets tumble as Trump warns of massive tariffs on Chinese goods
Donald Trump has threatened once more to impose "massive" US tariffs on China, accusing Beijing of "very hostile" actions to limit exports of rare earths essential for American industry.
Wall Street experienced a significant drop after the US president reignited public tensions with the Chinese government, raising the possibility of another contentious trade war between the world’s two largest economies.
Throughout the summer, relations between Washington and Beijing had improved, with Trump agreeing to significantly decrease the high tariffs he had levied on China earlier this year following negotiations between the two countries.
"I never thought it would come to this, but perhaps, as with all things, the time has come," Trump wrote on his Truth Social website, asserting: "Ultimately, though potentially painful, it will be a very good thing, in the end, for the U.S.A.
"One of the policies we are considering at this moment is a massive increase of Tariffs on Chinese products entering the United States of America. There are many other countermeasures that are, likewise, under serious consideration."
A planned meeting between Trump and Xi Jinping in South Korea later this month may not take place, Trump suggested, stating "there seems to be no reason" to meet with the Chinese president.
The US president’s threat sets the stage for another escalation in his unpredictable dispute with China. Just four months ago, he described US relations with the country as "excellent" after finalizing a tariff reduction deal.
Trump repeatedly increased US tariffs on Chinese goods in the spring, amid escalating tensions between the two countries, reaching a peak of 145%. Beijing retaliated by raising its own tariffs on US exports to 125%.
However, talks between officials, amidst widespread concern over the impact of such high duties on the global economy, led to a fragile detente. US tariffs on Chinese products dropped to 30%, while Chinese tariffs on US goods were reduced to 10%.
The president’s latest online assault on Beijing alarmed investors on Friday. The benchmark S&P 500 fell 1.5%, and the Dow Jones Industrial Average decreased by 0.8% in New York, while other leading markets also faced pressure. The FTSE 100 fell by 0.9% in London.
China is the world’s leading producer of rare earths, accounting for more than 90% of the world’s processed rare earths and rare-earth magnets. The 17 elements are crucial for manufacturers of products ranging from electric cars to aircraft engines.
Earlier this week, Beijing significantly expanded its export controls over rare earths, adding five new materials to its control list. Its last expansion of controls, back in April, led to global supply shortages before a series of diplomatic agreements helped resolve some of the issues.
"I have always felt that they’ve been lying in wait, and now, as usual, I have been proven right!" Trump exclaimed on Friday. "There is no way that China should be allowed to hold the World ’captive,’ but that seems to have been their plan for quite some time, starting with the ’Magnets’ and other Elements that they have quietly amassed into somewhat of a Monopoly position, a rather sinister and hostile move, to say the least.
"But the U.S. also has Monopoly positions, much stronger and more far-reaching than China’s."
Trump’s aggressive tariff strategy is a key component of his policy agenda. He has claimed that higher taxes on imports from around the world will reinforce the US economy and generate trillions of dollars for the federal government.
However, tariffs are often passed on to consumers, leading to higher prices. After years of heightened inflation, Trump has repeatedly insisted that none currently exists in the US. In reality, price growth has been on the rise.
Politics Editor
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